Ex-billionaire due in Montana bankruptcy court

BUTTE – Former billionaire Tim Blixseth was forced to answer questions under oath Monday about what happened to his fortune under mounting pressure from creditors who accuse the Yellowstone Club founder of hiding assets.

Attorneys for the club’s creditors questioned Blixseth over several hours during closed proceedings at the federal courthouse in Butte as part of a court-ordered debtor’s examination.

Courts have previously ruled that the Washington state resident diverted more than $200 million from the Yellowstone Club prior to its 2008 bankruptcy.

The club’s creditors want to collect on civil fraud judgments against Blixseth totaling $241 million. Blixseth’s attorneys say his fortune is now gone.

Blixseth answered the creditors’ questions during the examination, said Brian Glasser, the trustee of the Yellowstone Club Liquidating Trust. But Glasser would not discuss the details.

“This is just the beginning of the investigation,” he said. The trustee planned to review tax returns related to the case in Seattle in coming weeks.

U.S. Bankruptcy Judge Ralph Kirscher had closed Monday’s examination at Blixseth’s request after an Associated Press reporter sought to attend the proceedings. The judge said he wanted “candid statements” from Blixseth that “might not otherwise be heard.”

An attorney for The Associated Press and The Bozeman Daily Chronicle intervened to object to the closure, but the exam was over by the time an emergency hearing on the matter was held.

Kirscher gave all sides in the case 21 days to submit arguments as to whether transcripts of the proceedings should be made public.

Also barred from the debtor’s exam were lawyers from the Montana Department of Revenue. The agency is seeking $57 million in back taxes that officials say Blixseth owes.

Blixseth declined to comment to AP about the questions he faced. His lawyer, Philip Stillman, said he was pleased with how it went.

Blixseth was estimated by Forbes to be worth $1.3 billion prior to the Yellowstone Club’s 2008 bankruptcy, with properties in Montana, Mexico, California, Wyoming, Washington state and elsewhere.

His attorneys have said Blixseth’s fortune was burned up by legal fees, divorce and the economic downturn.

“Mr. Blixseth is a great business guy and I have no doubt he’ll rebound, but ... his assets have been dissipated and devalued and had to be sold,” Stillman said prior to the start of the exam.

Blixseth’s creditors have accused him of concealing or transferring assets to avoid paying outstanding judgments of $41 million in Montana and $200 million in California.

“I don’t believe him, not for a minute,” Glasser said of claims that Blixseth lost his fortune. “We’re going to try to figure out where everything is and where everything went.”

So far, the trust has managed to collect on just $141.07 from Blixseth, according to court documents.

The 13,600-acre Yellowstone Club, near Big Sky, Montana, attracted the likes of Bill Gates and former Vice President Dan Quayle after Blixseth and his then-wife created it more than a decade ago.

In 2005, Blixseth arranged a $375 million loan to the club from Credit Suisse. He took most of the money for himself and former wife Edra Blixseth.

The club spiraled into bankruptcy soon after Tim Blixseth ceded control to his wife as part of the couple’s 2008 divorce. It has since re-organized under new ownership.

Glasser earlier this month sued Blixseth’s current wife, Jessica Blixseth, saying she was holding assets that Blixseth had fraudulently transferred to her.

Glasser has previously asked a federal judge to incarcerate Blixseth for not abiding a court order. The trustee also has offered a reward to anyone who can reveal where Blixseth’s fortune is hidden.

If the creditors succeed in collecting on the judgments against Blixseth, it could come at the expense of the Montana tax case if there’s not enough money left over.

Court rulings in the tax dispute so far have come down in Blixseth’s favor. An appeal by the Montana Department of Revenue is pending in federal court. A related matter is pending before the Montana Tax Appeal Board.